The equity raising will be a 1-for-3 non-renounceable accelerated pro-rata rights offer at an issue price of 67¢ a share, which is a 9.3 per cent discount to its closing price of 75¢ a share on Monday.

China’s Ansteel, which is Gindalbie’s largest shareholder – and its joint venture partner in the Karara project – has agreed to take up its share of the new shares on offer. The remaining $134 million of the raising has been fully underwritten by UBS and Morgan Stanley.

Ansteel is unable to participate in the rights issue under the accelerated timetable due to the need to gain regulatory approvals. Therefore, it will take up its 36 per cent of the new shares on offer through a separate placement at the same price.

Gindalbie said the ongoing construction at the $2.57 billion iron ore project was underpinned by an existing $US1.2 billion Karara project loan which is currently drawn to $US778.5 million as well as previous equity payments of $772 million made by Gindalbie and Ansteel.

However, Gindalbie added there was a potential risk to the exchange rate assumptions made with the US dollar denominated loan facility due to the stronger Australian dollar. It said if the Australian dollar remained at current levels, that would lead to a shortfall of $150 million to $200 million which could be funded in “a number of ways", such as debt with the joint venture’s existing lenders.

Trading in Gindalbie shares is set to resume on Thursday after it completes the institutional component of the rights issue. The retail offer will close on August 12.